Vodafone Group maintained underlying growth in revenues in the first half of its fiscal year, while its bottom line was hit by a writedown on its business in India due to more difficult market conditions. The company raised its interim dividend thanks to improving cash flow.
Reported revenue for the six months to September fell 3.9 percent year-on-year to EUR 27.1 billion, and EBITDA was down 1.7 percent to EUR 7.9 billion, hurt by negative currency effects. Organic service revenue was still up 2.3 percent to EUR 24.8 billion. Growth accelerated to 1.0 percent in Europe in the second quarter from 0.3 percent in Q1, due mainly to better results in Germany and Italy. The AMP region showed a small slowdown in Q2, to 7.1 percent growth in organic service revenue compared to 7.7 percent in Q1.
Group EBITDA increased 4.3 percent on an organic basis, growing faster than revenues on the back of the 'Fit for growth' cost reduction programme and despite drag from roaming price cuts and increased content costs, Vodafone said. Both regions grew organic EBITDA faster than revenue, at growth of 3.1 percent in Europe and 9.2 percent in AMAP. Vodafone said it had benchmarked and refreshed the cost savings programme during the period and set new, internal three-year targets to achieve greater savings.
The company's net result was a loss of GBP 5.0 billion, versus a loss of GBP 2.3 billion a year ago, due to an impairment charge of GBP 5 billion in India for expected lower cash flow going forward due to increased competition after the entry of a new operator. Adjusted earnings fell 12.0 percent to 3.08 eurocents per share.
Vodafone's free cash flow turned slightly positive, at GBP 15 million compared to a negative GBP 756 million last year, as the company reduced capital spending by 22.8 percent to just under GBP 4 billion. As a result, the operator raised its interim dividend by 1.9 percent to 4.74 cents.
Vodafone said the group's performance in the first half was "modestly ahead of our expectations" and it expects the underlying results to continue in the second half. Europe is performing ahead of plan, while competitive intensity in India increased, and macroeconomic pressures remain.
The company updated its full year outlook to organic EBITDA growth of 3-6 percent, equivalent to EUR 15.7-16.1 billion at its guided foreign exchange rates, slightly narrower than the EUR 15.7-16.2 billion range originally envisaged.
Free cash flow for the year is expected to be at least EUR 4.0 billion, excluding M&A, spectrum payments and restructuring costs. The merger of Vodafone Netherlands and Ziggo is on track for completion around the end of 2016, the company added.
